Correlation Between Northern Stock and Multi Manager

Can any of the company-specific risk be diversified away by investing in both Northern Stock and Multi Manager at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Northern Stock and Multi Manager into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Northern Stock Index and Multi Manager Global Real, you can compare the effects of market volatilities on Northern Stock and Multi Manager and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Northern Stock with a short position of Multi Manager. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Stock and Multi Manager.

Diversification Opportunities for Northern Stock and Multi Manager

-0.46

Correlation Coefficient

Northern Stock  Multi Manager

Very good diversification

The 3 months correlation between Northern and Multi is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Northern Stock Index and Multi Manager Global Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Manager Global and Northern Stock is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Northern Stock Index are associated (or correlated) with Multi Manager. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Manager Global has no effect on the direction of Northern Stock i.e., Northern Stock and Multi Manager go up and down completely randomly.

Pair Corralation between Northern Stock and Multi Manager

Assuming the 90 days horizon Northern Stock Index is expected to generate 0.93 times more return on investment than Multi Manager. However, Northern Stock Index is 1.08 times less risky than Multi Manager. It trades about 0.0 of its potential returns per unit of risk. Multi Manager Global Real is currently generating about -0.23 per unit of risk. If you would invest  5,959  in Northern Stock Index on September 23, 2024 and sell it today you would lose (16.00) from holding Northern Stock Index or give up 0.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Northern Stock Index  vs.  Multi Manager Global Real

Northern Stock Index

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Stock Index are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Northern Stock is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Multi Manager Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Multi Manager Global Real has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Northern Stock and Multi Manager

The main advantage of trading using opposite Northern Stock and Multi Manager positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Stock position performs unexpectedly, Multi Manager can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Multi Manager will offset losses from the drop in Multi Manager's long position.

The idea behind Northern Stock Index and Multi Manager Global Real pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Money Managers module to screen money managers from public funds and ETFs managed around the world.